“Fear of Missing Out” Drives Stock Investing & Threatens Financial Security!
Posted By | December 15, 2017
There are basically two kinds of fear when it comes to stock market investing. One prompts individuals to be so cautious they do not invest in anything with real investment potential. The other exerts the opposite effect, encouraging investors to leave all reason at the door and dive into a soaring stock market – or some other “hot” asset – even as there are plenty of signals suggesting it’s best to stay on the sidelines. This kind of investor anxiety is known as the fear of missing out (FOMO) and can represent an even bigger threat to your financial well-being than that which causes you to remain entirely risk-averse.
“Fear of Missing Out” Fueled 1990s Dot-Com Bubble
A recent article at Money.CNN.com reminds us of the tremendous influence that FOMO can have over stock investing. One example cited by MSN points to the rush of investor money that helped inflate the dot-com bubble of the late 1990s. Anyone who remembers the climate of those days recalls loads of average folks pouring money into practically any listed startup that had a “.com” extension as a part of its name. The driving force behind the activity was the belief that the Internet was the wave of the future. In the eyes of these regular investors, any company whose business was the Internet represented the equivalent of a winning lottery ticket.
Except it wasn’t true. After hitting a then peak of 5,132.52 on March 10, 2000, the NASDAQ Composite lost nearly 80 percent of its value over the subsequent 30-month period as the dot-com bubble finally burst. Revealingly, the index would not see that March 2000 value again for another 15 years. Sadly, the fortunes of many investors who couldn’t resist binging on Internet stocks during the FOMO frenzy leading up to the collapse were wiped out.
For his part, Ed Yardeni of Yardeni Research, an investment research firm, thinks FOMO is a component of the current surge in stock investing. “You're seeing more people jumping in because they fear they are missing out on the bull market,” he tells CNN. Yardeni is particularly troubled by the heavy inflow of investor money into exchange-traded funds (ETFs) right now and thinks it is a sign that a “melt-up” may be in process. “Melt-ups” are frequently a direct consequence of investors’ fear of missing out, with asset prices screaming higher simply on the basis of the dramatic infusion of cash, without regard to whether the underlying fundamentals warrant the price action. Unsurprisingly, melt-ups often occur just before meltdowns in asset prices.
And it is the prospect of a meltdown that I believe should have every investor concerned at this time.
Help Defend Your Portfolio from Investor Exuberance with Gold and Silver
Hopefully, you are not a FOMO investor, and recognize the importance of effective diversification to the long-term success of a portfolio. However, achieving that kind of diversification involves more than randomly spreading your money across a variety of asset classes. Effective diversification demands ensuring the different asset classes you select have plausible potential to help maximize returns and/or minimize losses. This is a big part of why I believe precious metals are an essential, core component to a portfolio. With gold and silver’s historically low correlation to equities and record of performing well during periods of economic difficulty, no truly diversified portfolio should be without them, in my opinion.
But let’s say you are a “fear of missing out” kind of investor who simply cannot resist the temptation of a frothy market. If that’s true, it is even more important that you’re prepared to deal with the usually inevitable backslide the market could experience by arming your portfolio with resilient stores of value, such as gold and silver.
You already may know this is the second-longest bull (equities) market in history. And you also may be aware of the increasing calls from experts throughout the financial services industry for something between a steep correction and an all-out bear market in the near future. And yet, in the face of the growing amount of information out there that says it’s time to think about being someplace besides stocks, you may be someone who’s going in even deeper, unable to resist the lure of the upward momentum. If that is you, then before you put your next dollar into another stock or mutual fund, give Augusta Precious Metals a call at 855-242-4121. Let us talk with you about the array of uncorrelated gold and silver products available that can potentially help ensure your portfolio has a chair when this round of music finally, and suddenly, comes to a halt.
Your Future and Your Legacy!
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